Freedom’s Forge by Arthur Herman is unapologetic about how free enterprise, creativity and patriotic business figures turned a reluctant and consumer-focused American economy into ‘the arsenal of democracy’ that out innovated, out built and – with its allies -overwhelmed and outfought Nazi Germany and Imperial Japan in World War Two.
Herman’s book has important lessons for our time. It’s not a story of Franklin Delano Roosevelt’s Administration taking over the American economy and dictating that all production be directed at supporting the US and allied militaries’ needs. And nor is it a story of total wartime mobilisation of the US population and economy to support the war.
Instead, it begins with an America that isn’t at war, with a US President reassuring the American people they will stay out of the conflict. Ramping up US defence production to keep the United Kingdom in the war had to begin in this political and public environment.
A central insight from the book is that the best results are achieved by working with the type of economy and industry you have, even in wartime, instead of expecting that when conflict starts, government and bureaucrats step in to control and plan everything, with the civilian population and business along for the ride.
FDR had a track record of turning to outsiders and unusual appointees and advisers to do important jobs, instead of only using the big departments and agencies of the US government. This proved fundamental to American industrial success during the war.
Roosevelt turned to William S. Knudsen – head of Chevrolet and former Henry Ford protégé – to smash some of the bureaucratic and industrial roadblocks getting in the way of meeting the UK’s urgent needs for every type of military supply – from ships, to aircraft, tanks and munitions. Knudsen had a mind that was immersed in solving the practical problems of speedy, high quality mass production. His key qualities were his knowledge of American business and, as he said himself ‘My business is making things’.
America’s military knew what they needed and had designs and performance requirements for weapons, aircraft, ships and tanks, but they had no idea who in America with what techniques and partners and sub contractors could turn their lists into physical reality – certainly not at the scale and speed that war demanded.
So, a partnership formed – not neatly, but in the messy ways that a democracy works, with divided voices and interests and an economy filled with confident, driven but competitive makers, doers and business leaders. Knudsen convinced President Roosevelt to work with the grain of free enterprise and avoid stultifying central planning.
Before America was even in the war, production of everything a military needed – and the ships to carry these supplies through the Battle of the Atlantic – were starting to roll off production lines that months before had made cars and trucks. As the war progressed, whole new factories on greenfield sites were built, with newly trained workers that weeks before had been teachers, clerks or stay at home parents ending up turning out even the most advanced aircraft of the war: the B-29 Superfortress along with the ruthlessly austere Liberty merchant ships made .
Contracts signed in weeks, with upfront payments to set up new factories, buy new machine tools and employ workers. Profit and incentives to companies to get started and meet schedules weren’t seen as somehow unpatriotic in wartime, but the way to work with how business operates and succeeds in a vibrant economy.
A simple example of the power of working with companies instead of dictating all requirements to them is from mass production of tanks by Chrysler. The US Army’s design specified rivets to hold the tank body together – but those charged with turning tank production from a craft activity into one of mass production knew that this would be a major constraint. Knudsen showed that welding the joins instead of riveting them wasn’t just feasible, it performed better because rivets had a nasty habit of turning into shrapnel inside the tank when hit. The Sherman tank was the result.
Knudsen met with the heads of companies and industry associations continually – challenging them with the American and allied war needs and making the connections that helped them self-organise and get results – that included enough military materiel to win the war, while also continuing to supply the American civil economy’s needs for consumer goods (production of these grew through the war).
Working out what an economy and business community does well and doubling down on that was perhaps the key ingredient to success. But officials and politicians played their parts too – Knudsen and other industrialists and business figures partnered with innovative and capable military and civilian officials to solve some of the hardest problems – like getting hold of key metals and thinking through priority uses.
As European and Indo Pacific security get joined into a single strategic challenge for the world’s powerful democratic nations and people again – this time through Putin’s war in Ukraine and the strengthening strategic partnership between Putin and China’s Xi Jinping, the lessons and insights from ‘Freedom’s Forge’ are urgently in need of rediscovery and application.
For Australia, the insights would make us focus on what Australian industry can do well and apply that to the defence sector – that means focusing on making ‘the small, the cheap and the many’ – all the consumables of conflict we see the Ukrainians and Russians using in numbers including land, sea and air drones and counter drones, munitions and missiles. This would mean shifting from our abiding single focus on the exquisite, the complex and the few, which we can’t afford to lose in conflict and if we did we could not replace (like frigates costing $3billion or more each). It also means breaking out of the habit of Defence and Government seeking to solve all problems and specify the answers before engaging with business. Lastly, it means signing contracts and letting work happen to deliver military capability in short timeframes.